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India IT Services
Implications of Accenture
2Q11 Results for India IT
Quick Comment: Our key takeaways from Accenture1
results for India IT vendors are: 1) IT services as a
sector is capable of delivering a strong revenue growth
even in the current uncertain environment; and 2) India
IT vendors have indicated that discretionary spending
with clients is picking up. Accenture's strong revenue
growth/bookings in consulting/outsourcing further add to
the trend in our view.
Moreover, Accenture revenue growth of 17%yoy for the
quarter on a much higher revenue base than India IT
vendors, is an added positive for FY12e outlook for India
IT vendors in our view. We believe growth in IT services
driven by themes around globalization, digitalization,
and regulation is likely to be sustained in the medium to
long term for offshore vendors.
What's new: Accenture reported 2Q11 (ending
February 2011) net revenues of US$6.05bn ahead of its
guidance of US$5.6bn-US$5.8bn and also raised its FY
revenue growth guidance to 11%-14% in local currency.
Over the last few quarters, price improvement for India
IT companies has been slower than expected.
Consistent with the commentary of large India IT
vendors, Accenture management indicated that it is
seeing early signs of pricing improvement in the market.
Maintain in-line industry view: We believe the large
India offshore vendors will continue to benefit from their
existing large clients increasing work due to vendor
consolidation exercise. Strong offshore hiring by MNC
players could also put upward pressure on upcoming
wage hikes in April 2011 for India IT vendors.
At current levels our top OW are Infosys and HCL Tech
that are likely to lead peers in terms of EPS growth for
FY12e in our view. Amongst the smaller vendors we
expect Patni (also OW) to emerge as a rerating
candidate over the coming quarters.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India IT Services
Implications of Accenture
2Q11 Results for India IT
Quick Comment: Our key takeaways from Accenture1
results for India IT vendors are: 1) IT services as a
sector is capable of delivering a strong revenue growth
even in the current uncertain environment; and 2) India
IT vendors have indicated that discretionary spending
with clients is picking up. Accenture's strong revenue
growth/bookings in consulting/outsourcing further add to
the trend in our view.
Moreover, Accenture revenue growth of 17%yoy for the
quarter on a much higher revenue base than India IT
vendors, is an added positive for FY12e outlook for India
IT vendors in our view. We believe growth in IT services
driven by themes around globalization, digitalization,
and regulation is likely to be sustained in the medium to
long term for offshore vendors.
What's new: Accenture reported 2Q11 (ending
February 2011) net revenues of US$6.05bn ahead of its
guidance of US$5.6bn-US$5.8bn and also raised its FY
revenue growth guidance to 11%-14% in local currency.
Over the last few quarters, price improvement for India
IT companies has been slower than expected.
Consistent with the commentary of large India IT
vendors, Accenture management indicated that it is
seeing early signs of pricing improvement in the market.
Maintain in-line industry view: We believe the large
India offshore vendors will continue to benefit from their
existing large clients increasing work due to vendor
consolidation exercise. Strong offshore hiring by MNC
players could also put upward pressure on upcoming
wage hikes in April 2011 for India IT vendors.
At current levels our top OW are Infosys and HCL Tech
that are likely to lead peers in terms of EPS growth for
FY12e in our view. Amongst the smaller vendors we
expect Patni (also OW) to emerge as a rerating
candidate over the coming quarters.
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